Learn all about Capital Gains Tax (CGT) in Kenya – including how it applies to property sales, foreign shares, CGT exemptions, computation methods, tax rates, and how to file and pay CGT through iTax. This guide is ideal for real estate sellers, investors, and legal professionals in Kenya.
What is Capital Gains Tax (CGT) in Kenya?
Capital Gains Tax (CGT) in Kenya is a tax levied on profits (gains) realized from the transfer or sale of property, such as land, buildings, and shares. It is charged on capital gains arising from the disposal of assets by individuals, companies, or partnerships.
CGT was reintroduced under the Finance Act 2014 and became effective from 1st January 2015, with additional amendments introduced in July 2023.
What Transactions Attract CGT in Kenya?
1. Transfer of Property in Kenya
CGT is applicable on property transfers (land, buildings, real estate, etc.) located in Kenya, where the property was acquired on or before 1st January 2015 and disposed of on or after this date.
2. Sale of Shares in Foreign Entities
Effective 1st July 2023, CGT also applies to gains from the sale of shares or comparable interests in foreign entities that derive more than 20% of their value from immovable property in Kenya.
3. Disposal by Non-Resident Investors
Also from 1st July 2023, non-residents who own more than 20% of a Kenyan company are liable to pay CGT when they dispose of their interests.
What is the CGT Tax Point?
The CGT tax point is the moment of property transfer. This is defined as the point at which the transfer instrument is registered in the buyer’s (transferee’s) name or when the full purchase price is received, whichever comes first.
CGT is payable by the seller (transferor).
CGT Rate in Kenya
The Capital Gains Tax rate in Kenya is 15% of the net gain realized from the transfer of property or shares.
This is a final tax, meaning the capital gain is not subject to any further taxation once CGT is paid.
Net Gain = (Transfer Value – Incidental Costs on Transfer) – Adjusted Cost
Adjusted Cost = Acquisition Cost + Incidental Costs on Acquisition + Enhancement Costs
What Constitutes a Property Transfer?
CGT is triggered when:
- A property is sold, exchanged, gifted, or conveyed in any form.
- There is loss, destruction, or compensation related to the property.
- Rights to the property are abandoned, surrendered, or expire.
- Shares are surrendered due to company dissolution.
Allowable Expenses Under CGT
To determine net gains, allowable expenses are deducted from the selling price. These include:
- Cost of Acquisition / Construction
- Loan or Mortgage Interest
- Legal Fees
- Valuation Costs
- Cost of Advertising for a Buyer
- Improvement/Enhancement Costs
How to Determine Transfer Value (Selling Price)
The transfer value includes:
- The sale price of the property.
- Compensation for abandonment, damage, or surrender.
- Insurance reimbursements for loss or damage.
- Payments for use or exploitation (e.g., royalties, rent).
Exemptions from Capital Gains Tax in Kenya
Not all property transfers are subject to CGT. Key CGT exemptions in Kenya include:
- Transfers between spouses or former spouses in divorce or separation.
- Transfers to immediate family members or family-owned companies.
- Inheritance transfers by personal representatives to beneficiaries.
- Transfers for securing or repaying a loan.
- Company restructuring within a group that’s existed for at least 24 months.
- Private residence exemption – if the owner has lived in the property for at least 3 years prior to the transfer.
- Issuance of company shares or debentures.
Capital Gains Tax (CGT) in Kenya is an important tax obligation for anyone selling property, land, buildings, or shares. With a flat 15% CGT rate, no further tax applies once paid. Understanding CGT computation, exemptions, and filing procedures through iTax Kenya ensures compliance and avoids penalties.
If you’re unsure how to calculate your CGT liability or need help with filing Capital Gains Tax online, reach out to our tax professionals for expert guidance and support.
